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CBO says government finances will be in dire straits by 2038

Federal taxes will go up, but spending will rise even faster over the next 25 years, leaving the national government in dire fiscal straits, according to projections the Congressional Budget Office released Tuesday.

In one key finding, the CBO figures show that in order to keep Social Security solvent without cutting projected benefits, the government would have to impose an immediate and permanent 3.4 percent payroll tax increase.

Overall, as the population ages, the government will bleed red ink, with spending — which is about 21 percent of gross domestic product right now — reaching 26.2 percent of GDP by 2038.

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In one key finding, the CBO figures show that in order to keep Social Security solvent without cutting projected benefits, the government would have to impose an immediate and permanent 3.4 percent payroll tax increase.

Yeah, and this supposes that the increase won’t have any effect on economic activity. More static analysis.